Dave Ramsey lists these retirement mistakes. I’m not a big fan of his methods, but he has a point here.
What is the excuse for not planning for retirement? For the vast majority of people there isn’t any. I recently wrote an article for HumbleDollar talking about living within your means and what it takes to do that.
1. 54% Don’t Know Their Retirement Needs
Many factors play a role in your savings needs, including your retirement age, intended lifestyle, cost of living, inflation, income sources and healthcare costs. You can use an online calculator, such as this one from the AARP, or speak to a retirement advisor to find out.
2. The Average Yearly Social Security Benefit Is Less Than $22,000
If you expect to live off your monthly Social Security payments, you might be surprised that the average monthly payment was just $1,790 ($21,470 annually) in July 2023. The Social Security Administration also mentioned the payments are made to only cover 40% of what you had earned while working.
3. About 34% Haven’t Saved Anything
A 2023 report from Ramsey Solutions showed that 34% hadn’t saved any money at all. This not only includes money for retirement but also an emergency fund and savings for other goals. In addition to causing financial struggles during retirement, having no savings to handle today’s emergencies is dangerous and could lead to debt.
4. Around 39% Don’t Invest in Stocks
Ramsey mentioned that 39% of Americans didn’t invest in stocks, which tend to have the best average returns among investments.
Ramsey suggested investing in them through mutual funds rather than individually to reduce your risk and benefit from the professional guidance.
5. A Majority — 69% — Think Their Retirement Savings Aren’t on Track
Whether or not they know their goal amount, around 69% of non-retirees don’t feel confident about their retirement savings being on track. This statistic that Ramsey highlighted was based on a 2023 Federal Reserve report that showed how retirement preparedness varied based on different demographic factors.
6. Approximately 40% Don’t Have Professional Advisors
Ramsey wrote, “Trying to save for retirement without professional help is like wandering into a haunted house alone in the dark without a flashlight.” The 40% of Americans without professional advisors are at a disadvantage with everything from figuring out retirement savings needs and investment options to getting help when their savings get off track.
Yahoo finance
Not everyone needs a financial advisor, but they do need a good measure of financial literacy. That can be obtained in many ways, including employer programs, the AARP, following good blogs such as New Retirement and certainly HumbleDollar where you will find not only good advice and suggestions but real life stories by people who had to deal with all sorts of financial issues.
QUINNSCOMMENTARY 
The obvious solution to the retirement income dilemma is to increase social security payments to a true retirement income level and throw out the old 3 legged stool mentality.
It is obvious after all this time that the majority of people can’t or won’t save for retirement. The tax benefits available for tax deferred savings plans go to people above the median income level. Even with that, a lot of people above the median income level don’t take advantage.
There are many financial advisors out there who are making big bucks or striving to make big bucks off gullible people and too many ads encourage the financially ignorant to flock to an advisor. That is the free market at work but sharing retirement savings with someone else is detrimental to your assets.
I have come to the conclusion that making social security a true retirement program is the answer. It is touted that the lower income retirees get up to 40% replacement at FR. Big whoop. Make it 80% or 90% and keep the replacement rate high but scale down slowly for income earners at higher percentiles. Will it cost an arm and a leg? Yes it will but payroll taxes are going up anyway and tax incentives for current retirement vehicles (401k, IRA, and others) can be eliminated and tax savings can go into SSA. Likewise, employers can contribute more.
I don’t see any other way. Retirement income and savings has been talked about for decades and nothing significant ever changes.
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Sorry, let’s first properly fund Social Security and Medicare, before we add to our societal burdens. Let’s collect the necessary taxes to fund what Congress has already promised, instead of shoving down the throats of those too young to vote and generations yet unborn.
With respect to retirement preparation, our current systems are more than adequate for those who have retirement preparation as a priority:
In 1975, the first year we had Form 5500 reporting, the DOL recorded:
• 103,346 Defined Benefit (DB) pensions, 207,748 Defined Contribution (DC) plans, Total: 311,094
• 33,004,000 DB Participants, 11,507,000 DC Participants, Total: 44,511,000
• $185,950,000,000 DB Assets, $74,013,000,000 DC Assets, Total: $259,963,000,000
So, an average asset value of $5,567 per DB Participant and $6,432 per DC Participant. There is “double counting” as some workers had both a DB and DC benefit as some employers provided both plans.
Before the Tax Reform Act of 1986, many DB pensions used final average pay formulas with age and service eligibility requirements and ten-year vesting. Many DC plans with thrift and profit-sharing designs also had eligibility and vesting provisions. As a result, retirement benefits were often highly concentrated among older, longer-service, higher-paid workers.
In 2021, the last year for which we have Form 5500 reporting, the DOL recorded:
• 46,388,000 DB pensions, 718,736 DC Plans, Total: 765,124
• 31,235,000 DB Participants, 114,931,000 DC Participants, Total 146,166,000 Participants
• $3,670,366,000,000 DB Assets, $9,499,141,000,000 DC Assets, $13,169,507,000,000 Total Assets
So, an average asset value of $117,170 per DB Participant and $82,651 per DC Participant.
Much has changed. Most DC plans now incorporate 401(k) features. “More than two-thirds (67.4 percent) of companies allow employees to begin contributing … within three months of hire” compared to 40% 25 years ago and the percentage of plans that fully vest workers after three or fewer years of service has increased from 35.5% 25 years ago to 66.3% – an 87% increase!
That is significant growth. It reflects a dramatic change away from benefits concentrated among higher-paid, long-service older workers to a broad cross-section of workers.
Account balances don’t reflect payouts. One can only guess about the amount of tax-preferred savings that has already been distributed – whether in the form of rollovers to IRAs, or in cash (from a plan, or after rollover, from IRAs). The Joint Tax Committee (JTC) estimated DB and DC plans and IRA outflows for 2015 as $1.256 Trillion. That’s likely in excess of $20 Trillion during the 21st Century, which is about 2/3rds of the estimated $33 Trillion in assets today in tax-qualified plans (DB, DC, IRA).
Not perfect, but, increasing everyone’s Social Security taxes to fully fund the current promises, then increasing taxes a second time to make the improvements you want, means it will likely crowd out retirement savings in the private sector.
I think the government has screwed up entitlements like Social Security and Medicare – let’s seem them fix the status quo, before giving them any more rope.
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